SHARE



ABOUT THE AUTHOR


Zeus Kerravala
Zeus Kerravala is the founder and principal analyst with ZK Research. Kerravala provides a mix of tactical advice to help his...
Read Full Bio >>
SHARE



Zeus Kerravala | January 20, 2017 |

 
   

Avaya's Six Billion Dollar Plan

Avaya's Six Billion Dollar Plan Crippled Avaya needs to become better, stronger, faster -- just like TV's iconic bionic man.

Crippled Avaya needs to become better, stronger, faster -- just like TV's iconic bionic man.

Remember the TV show "The "Six Million Dollar Man"? It started with intelligence director Oscar Goldman talking about how a $6 million investment could make former astronaut Steve Austin "better" than he had been before being crippled -- better, strong, faster. Avaya is going through something similar, except we can plunk three more zeros onto the price tag.

Avaya needs to be better, stronger, and faster for sure, but it couldn't do that with $6 billion in debt hanging over its head, as previously discussed on No Jitter. So for the past several months, the company has been trying to sell off different business units to pay off at least part of the debt. As No Jitter Editor Beth Schultz pointed out in yesterday's news post, the company has $600 million in debt due this October. While it might have been able to hold off bankruptcy until at least 2018 when more would come due, it opted to go into Chapter 11 now.

So what happened? Why wasn't Avaya able to get some company to bite on the networking or the contact center businesses? Both are valuable assets, yet Avaya couldn't come to an agreement with any buyer.

Staving Off a Fire Sale
As most people know, I'm not a contact center expert, so I let others speak to that space (see "Avaya Keeps Crown Jewel, Contact Center," today's No Jitter post from one such expert, Sheila McGee-Smith, of McGee-Smith Analytics). But I do closely follow the network business, and I know a number of companies had been interested in that asset. Slowly the buyers backed out.

Frankly, the biggest barrier to taking the business unit fell to a people issue related to pension liabilities. The networking business would have come with about 600 employees, many of whom have pensions or contracts. The cost of rationalizing down the employee base would have been prohibitively high for a buyer, and so the only offers Avaya received were far below market price. I'm glad to see Avaya decided to keep the company intact instead of giving away valuable assets in a fire sale.

Clearly something needed to change as Avaya was drowning in its massive debt obligations. Filing for bankruptcy was the only option it had left, and I believe the best possible outcome for it.

Now, the Hard Work
I know some people see the word "bankruptcy" and think the company is shutting down, but that's not the case. Lots of companies have filed for Chapter 11 and have come back strong. American Airlines, Kodak, and General Motors are just a few that come to mind. The key is to make tough calls and truly transform the company, even if it means doing things that might negatively impact it in the short term. After all, we are living in the disrupt or be disrupted era.

Now is when the hard work begins, and Avaya has many challenges ahead. It has a lot of issues to fix, and if it doesn't, this exercise will be for nothing.

CEO Kevin Kennedy has positioned Avaya as a full-stack provider, and that's important in this digital world in which the complexity of cobbling together point product solutions can be high. Because of this, many businesses prefer vertically integrated solutions, and Avaya has previously tried to deliver those. The problem today is that the company's portfolio aligns with delivery of what had been a full stack a decade ago.

Avaya has many good parts -- UC, contact center, video, network infrastructure, and Wi-Fi -- but it needs to somehow augment those with emerging areas like security, software-defined WAN, augmented reality, and machine learning. It can fill some of these holes via partnerships, such as the one it has with FatPipe to extend its fabric to the WAN (see related post). But it should build up capabilities in other areas, like machine learning, in house.

If Avaya does end up selling off parts (which, again, I hope it doesn't), it should use the money to acquire pieces needed to modernize the stack. Avaya has many of the components it needs to compete in a rapidly digitized world. It needs to keep them together while adding to them with emerging technologies. In all likelihood the short-term solution will be to fill the voids through technology alliances and a major shift in internal R&D.

Another challenge is platform modernization. For example, Avaya has built its Avaya Pod Fx, for virtualized communications, on converged infrastructure. While that may meet the needs of some enterprises, making it available on an even more tightly integrated, software-centric hyperconverged platform could significantly cut the footprint down from a full rack to probably a quarter of that size, lower the price point, and increase the agility.

'Cloud By Avaya'
One last area of focus for Kennedy and team should be in delivering an Avaya-branded cloud. As I pointed out earlier this week in my post, "The Curious Case of Zang Office," midmarket enterprises do have the option of buying a true cloud offering through Avaya offshoot Zang, a CPaaS solution. But an Avaya solution requires that a business either builds its own private cloud or gets the capability from a partner that has deployed the infrastructure.

I had a conversation with an Avaya sales rep about a week ago regarding Equinox, the converged multimedia communications, collaboration, and conferencing client and server-side component introduced in the fall (see related post, "Avaya Evolves Enterprise Portfolio"). Equinox is a great product with strong customer interest, the sales rep told me. However, if the customer wants the full version it has to dedicate what the rep described as "an insane amount of data center resources." If Avaya had its own branded cloud, the discussion would center on the number of users to support, and the company would be up and running very quickly. The "Powered by" model is a nice approach, but it should be a supporting actor in an overall cloud story, not the main focus.

One final point: Kennedy has mentioned several times about shifting Avaya to a successful software and services business. While I agree it needs to continue down that path, I caution the company to not over-rotate away from hardware. Some things will always be done best in hardware, while others are optimized in software and some in silicon. The key is to leverage the strengths of each and strike a balance instead of swinging the pendulum too far in one direction.

Avaya has filed bankruptcy and set a plan in motion. In the digital era, market leaders move with speed. Now that Avaya will be able to unburden itself from its massive debt, it should become, like the bionic man, better, stronger, and faster.

Follow Zeus Kerravala on Twitter and Google+!
@zkerravala
Zeus Kerravala on Google+





COMMENTS




Enterprise Connect Orlando 2018
March 12-15 | Orlando, FL

Connect with the Entire Enterprise Communications & Collaboration Ecosystem


Stay Up-to-Date: Hear industry visionaries in Keynotes and General Sessions delivering the latest insight on UC, mobility, collaboration and cloud

Grow Your Network: Connect with the largest gathering of enterprise IT and business leaders and influencers

Learn From Industry Leaders: Attend a full range of Conference Sessions, Free Programs and Special Events

Evaluate All Your Options: Engage with 190+ of the leading equipment, software and service providers

Have Fun! Mingle with sponsors, exhibitors, attendees, guest speakers and industry players during evening receptions

Register now with code NOJITTEREB to save $200 Off Advance Rates or get a FREE Expo Pass!

January 24, 2018

Communications, collaboration, and contact center systems are all being delivered from the cloud, to more enterprises each year. With the cloud growing in strategic importance, the question is what

December 13, 2017

The two major vendors in the Unified Communications space, Cisco and Microsoft, are both strongly promoting their cloud UC deployments. If cloud UC is on your enterprises roadmap, but you dont want

November 29, 2017

As video conferencing use rises in the enterprise, businesses are looking for ways to bring this technology out of traditional conference room and make it more broadly accessible. That's made the h

December 20, 2017
Kevin Kieller, partner with enableUC, provides advice on how to move forward with your Skype for Business and Teams deployments.
December 20, 2017
Zeus Kerravala, principal analyst with ZK Research, shares his perspective on artificial intelligence and the future of team collaboration.
December 20, 2017
Delanda Coleman, Microsoft senior marketing manager, explains the Teams vision and shares use case examples.
November 30, 2017
With a ruling on the FCC's proposed order to dismantle the Open Internet Order expected this month, communications technology attorney Martha Buyer walks us through what's at stake.
October 23, 2017
Wondering which Office 365 collaboration tool to use when? Get quick pointers from CBT Nuggets instructor Simona Millham.
September 22, 2017
In this podcast, we explore the future of work with Robert Brown, AVP of the Cognizant Center for the Future of Work, who helps us answer the question, "What do we do when machines do everything?"
September 8, 2017
Greg Collins, a technology analyst and strategist with Exact Ventures, delivers a status report on 5G implementation plans and tells enterprises why they shouldn't wait to move ahead on potential use ....
August 25, 2017
Find out what business considerations are driving the SIP trunking market today, and learn a bit about how satisfied enterprises are with their providers. We talk with John Malone, president of The Ea....
August 16, 2017
World Vision U.S. is finding lots of goodness in RingCentral's cloud communications service, but as Randy Boyd, infrastructure architect at the global humanitarian nonprofit, tells us, he and his team....
August 11, 2017
Alicia Gee, director of unified communications at Sutter Physician Services, oversees the technical team supporting a 1,000-agent contact center running on Genesys PureConnect. She catches us up on th....
August 4, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, has lately been working on integrating enterprise communications into Internet of Things ecosystems. He shares examples and off....
July 27, 2017
Industry watcher Elka Popova, a Frost & Sullivan program director, shares her perspective on this acquisition, discussing Mitel's market positioning, why the move makes sense, and more.
July 14, 2017
Lantre Barr, founder and CEO of Blacc Spot Media, urges any enterprise that's been on the fence about integrating real-time communications into business workflows to jump off and get started. Tune and....
June 28, 2017
Communications expert Tsahi Levent-Levi, author of the popular BlogGeek.me blog, keeps a running tally and comprehensive overview of communications platform-as-a-service offerings in his "Choosing a W....
June 9, 2017
If you think telecom expense management applies to nothing more than business phone lines, think again. Hyoun Park, founder and principal investigator with technology advisory Amalgam Insights, tells ....
June 2, 2017
Enterprises strategizing on mobility today, including for internal collaboration, don't have the luxury of learning as they go. Tony Rizzo, enterprise mobility specialist with Blue Hill Research, expl....
May 24, 2017
Mark Winther, head of IDC's global telecom consulting practice, gives us his take on how CPaaS providers evolve beyond the basic building blocks and address maturing enterprise needs.
May 18, 2017
Diane Myers, senior research director at IHS Markit, walks us through her 2017 UC-as-a-service report... and shares what might be to come in 2018.
April 28, 2017
Change isn't easy, but it is necessary. Tune in for advice and perspective from Zeus Kerravala, co-author of a "Digital Transformation for Dummies" special edition.
April 20, 2017
Robin Gareiss, president of Nemertes Research, shares insight gleaned from the firm's 12th annual UCC Total Cost of Operations study.
March 23, 2017
Tim Banting, of Current Analysis, gives us a peek into what the next three years will bring in advance of his Enterprise Connect session exploring the question: Will there be a new model for enterpris....
March 15, 2017
Andrew Prokop, communications evangelist with Arrow Systems Integration, discusses the evolving role of the all-important session border controller.
March 9, 2017
Organizer Alan Quayle gives us the lowdown on programmable communications and all you need to know about participating in this pre-Enterprise Connect hackathon.
March 3, 2017
From protecting against new vulnerabilities to keeping security assessments up to date, security consultant Mark Collier shares tips on how best to protect your UC systems.
February 24, 2017
UC analyst Blair Pleasant sorts through the myriad cloud architectural models underlying UCaaS and CCaaS offerings, and explains why knowing the differences matter.
February 17, 2017
From the most basics of basics to the hidden gotchas, UC consultant Melissa Swartz helps demystify the complex world of SIP trunking.
February 7, 2017
UC&C consultant Kevin Kieller, a partner at enableUC, shares pointers for making the right architectural choices for your Skype for Business deployment.
February 1, 2017
Elka Popova, a Frost & Sullivan program director, shares a status report on the UCaaS market today and offers her perspective on what large enterprises need before committing to UC in the cloud.
January 26, 2017
Andrew Davis, co-founder of Wainhouse Research and chair of the Video track at Enterprise Connect 2017, sorts through the myriad cloud video service options and shares how to tell if your choice is en....
January 23, 2017
Sheila McGee-Smith, Contact Center/Customer Experience track chair for Enterprise Connect 2017, tells us what we need to know about the role cloud software is playing in contact centers today.